  
  One use of inventory is 

  to ensure that item cost is maximized.
You are watching: Policies based on abc analysis might include investing

 to provide a hedge against inflation. 
 to tightly link production and distribution processes. 
 to tightly link a firm"s production with its customers" demand. 
  
  ABC analysis divides an organization"s onhand inventory into three classes based upon 

  annual dollar volume. 
 annual demand. 
 the number of units on hand. 
 unit price. 
  
  Cycle counting 

  is a process by which inventory records are verified. 
 provides a measure of inventory turnover. 
 assumes that all inventory records must be verified with the same frequency. 
 cannot be done in an independent demand situation. 
  
  The difference(s) between the basic EOQ model and the production order quantity model is (are) that 

  there are no holding costs in the production order quantity model. 
 the EOQ model does not require the assumption of known, constant lead time. 
 the production order quantity model does not require the assumption of instantaneous delivery. 
 the production order quantity model does not require the assumption of known, constant demand. 
  
  Extra units that are held in inventory to reduce stockouts are called 

  demand variance. 
 justintime inventory. 
 reorder point. 
 safety stock. 
  
  Inventory record accuracy would be decreased by 

  cycle counting. 
 ABC analysis. 
 increasing stockroom accessibility. 
 reorder points. 
  
  The two most important inventorybased questions answered by the typical inventory model are 

  when to place an order and what is the cost of the order. 
 how many of an item to order and what is the cost of this order. 
 when to place an order and how many of an item to order. 
 how many of an item to order and with whom the order should be placed. 
  
  The appropriate level of safety stock is typically determined by 

  choosing the level of safety stock that assures a given service level. 
 taking the square root of the economic order quantity. 
 carrying sufficient safety stock so as to eliminate all stockouts. 
 minimizing expected stockout cost. 
  
  Which of the following is NOT a type of inventory? 

  raw material 
 workinprocess 
 MRP 
 finished goods 
  
  In the probabilistic model, increasing the service level will 

  reduce the cost of the inventory policy. 
 increase the cost of the inventory policy. 
 cannot be determined. 
 have no impact on the cost of the inventory policy. 
  
  A system that triggers ordering on a uniform time basis is called a 

  fixedquantity system. 
 reorder point system. 
 EOQ. 
 fixedperiod system. 
  
  A company wishes to determine the EOQ for an item that has an annual demand of 2,000 units, a cost per order of $75, and annual carrying cost of $7.50 per unit. What is the EOQ? 

  73 
 200 units 
 40,000 units 
 100 
  
  A production facility is trying to determine the best batch size for an item that is produced intermittently. This item has an annual demand of 1,000 units, an annual carrying cost of $10 per unit, and a setup cost of $400. They operate 50 weeks per year, and can produce 40 units per week. What is the best batch size for this item? 

  65 
 400 
 283 
 800 
  
  A store wants to ensure a shelf full of marshmallow peeps as the holiday season approaches. Daily demand for peeps is normally distributed with a mean of 25 and a standard deviation of 5. Lead time is 3 days and the store intends a 98% service level. What is their reorder point? 

  107 
 93 
 87 
 75 
  
  A production facility is trying to expand production on a machine that is currently used to produce one part. This item has an annual demand of 1,000 units, an annual carrying cost of $10 per unit, and a setup cost of $400. They operate 50 weeks per year, and can produce 40 units per week. What percentage of the time are they using this machine? 

  50% 
 30% 
 40% 
 20% 
  
  Policies based on ABC analysis might include investing 

  more in supplier development for A items. 
 extra care in forecasting for C items. 
 the most time and effort verifying the accuracy of records for B items. 
 more in inventory security for C items. 
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